Spotify Q4 reports 271M total MAUs on revenues of $2B, podcast listening grows 200%

Ingrid Lunden

Streaming music now accounts for more than 80 percent of all music consumption in key markets like the U.S., and one of the big leaders in the field is reaping some of the rewards. Spotify reported its Q4 results today, which noted that the company now has 271 million subscribers, up 31% on a year ago. Paying users are up 29 percent to 125 million. Overall revenues for the quarter hit $2 billion (€1.9 billion), up 24 percent on a year ago with a gross margin of 25.6 percent. The company continues to post big operating losses; however, this quarter's was $85 million (€77 million), with its loss per share now at $1.26 (€1.14 ) — more on that number below.

Podcasts made an especially good showing, growing about 200 percent over last year, the company said. More than 16 percent of its MAUs are now listening to its podcast content. (Perhaps that's one reason we keep seeing rumours about Spotify acquiring more popular podcast brands like The Ringer. Update: THEY BOUGHT IT!)

This falls in line with Spotify's previous forecast, where it said it had expected total MAUs of between 255 million and 270 million; premium subscribers of 120 million and 125 million; and revenues of €1.74 billion and €1.94 billion ($1.9 billion and $2.1 billion), gross margins of 23.7 percent to 25.7 percent and an operating loss of between €31 million and €131 million.

Analysts expected, on average, revenues of $2.09 billion on EPS of -$0.25, both of which Spotify missed. Shares are nonetheless up about 1.74 percent in pre-market trading.

Spotify also posted some forecasts for the current quarter, where it expects total MAUs of 279-289 million and premium subscribers of 126-131 million. But it notes that revenues will decline to €1.71-€1.91 billion while gross margins of 23.5 percent to 25.5 percent will be steady with its operating of loss of €65 million to €115 million to not show signs of budging soon.

The company is still the biggest of all streaming platforms, but its well-capitalised competition is also growing. Amazon last month announced 55 million users for Amazon Music and Apple reported last summer that it had 60 million paying users. TikTok is also gearing up to launch a music streaming service with hopes of a jump start in the business by tapping the fast-growing, music-focused, and mobile-friendly audience it's picked up for its popular, eponymous short-form video app.

Those are the names that are perhaps most meaningful in the U.S. and Europe, but when you look to other markets, the competition gets even bigger. Gaana in India now has 152 million MAUs in that country alone, posing a big competitive threat as Spotify looks to grow in that market.

Spotify noted that its MAUs for the quarter were "the highest net add quarter we’ve ever experienced, and the fastest we’ve ever added 10 million subscribers." This was boosted by its free three-month trial offers, which now also apply to Family plans, and its six-month trials that it sells via some retailers. Its ongoing partnership with Google Home and the new ability for Alexa owners to stream off Spotify's free tier will also be playing into that growth.

Within its revenue growth, it noted opposite trends in the two main business areas that feed into that. Premium subscribers performed better than Spotify had expected, at €1,638 million, up 24 percent over a year ago, even with average revenues down 5 percent (due to free trials getting extended). Advertising was at €217 million, up 23 percent.

Spotify explained that operating expenses -- €551 million in Q4, up 80percent on last year -- and the subsequent impact on loss per share were due to "higher than expected social charges resulting from an increase in our share price."

Social charges, it noted, are payroll taxes associated with stock-based compensation. "We are subject to social taxes in several countries in which we operate, although Sweden accounts for the bulk of the social costs. We don’t forecast stock price changes in our guidance so upward or downward movements will impact our reported operating expenses. In Q4, the increase in our share price resulted in social charges that were more than €20 million higher than planned."

It added that "excluding the higher than planned social charges, Operating Loss would have finished slightly better than forecast as a result of the slight outperformance in Gross Profit."

Podcasts remain a big news story for the company with its strong growth. There are now 700,000 podcast titles on Spotify, with new discovery features getting added to help users manage that catalogue.

Spotify last year spent what's estimated at between $400 million and $500 million on buying up podcast-related businesses, and it's kicked off this year with another podcast acquisition, snapping up Bill Simmons' The Ringer network to boost both its sports coverage, as well as its positioning in what it sees as the future of media.

"The trend that we are investing in here is that radio is moving online," CEO Daniel Ek said in the earnings call today, later adding: "We bought the next ESPN."

The company has long been working on trying to build a two-sided marketplace, providing tools for artists to help monetise and market their content, and that is now also expanding to podcasts, where Spotify is doubling down on original content and services for producers of the shows, with a new wave of these now going up internationally. Titles include Hypnosis Radio in Japan, Fausto in Mexico, an adaptation of Parcast title Cults for German audiences called SEKTEN & KULTE, and its first three original podcasts in India: 22 Yarns, Love Aaj Kal, and Bhaskar Bose.

Updated with comments from the earnings call and the news that Spotify has acquired The Ringer, which it announced right after it released its earnings. You can see more on the latter story here.